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CRE Market Plateauing? New Sentiment Survey Shows This May Be the Case

A third quarter Sentiment Index just released by The Real Estate Roundtable, a public policy organization, shows that senior CRE executives’ expectations for the commercial real estate market over the next 12 months are becoming more moderate than they were a year ago.

The Roundtable’s Overall Sentiment Index, researched in July, came in at 61 on a scale of 1 to 100, where 100 would indicate that all survey respondents felt that current market conditions are “much better” than they were a year ago and will be “much better” in a year’s time. The Future Sentiment Index came in 11 points lower than in the third quarter of 2014, at 56.

Forty eight percent of respondents believe that real estate market conditions will be about the same a year from now as they are today, while another 30 percent believe market conditions will be “somewhat better” and 5 percent expect conditions to be “much better.”

In contrast, 56 percent feel that market conditions are “somewhat better” today than they were in the third quarter of 2014, 33 percent feel conditions are about the same as a year ago and 7 percent believe they are “much better.”

Nobody expects real estate market conditions to get much worse in the year ahead, but 17 percent of respondents do feel they will get “somewhat worse” by the third quarter of 2016.

When it comes to asset values, 45 percent of respondents expect them to stay the same over the next year. Thirty one percent think they may be “somewhat higher” in third quarter 2016 and 24 percent think they may become “somewhat lower.”

In comparison to last year, 80 percent of respondents feel that asset values are now “somewhat higher,” 14 percent believe they are “much higher” and 6 percent view asset values as being about the same as in the third quarter of 2014.

“I don’t think we will gain much in terms of pricing for real estate over the next 12 months, but I do believe that absent any significant shocks to the economy, we can maintain this pricing over the next 12 months—stability,” according to one of the respondents.

A majority of respondents (57 percent) believe that debt and equity capital will remain as readily available in 2016 as it is today. Twenty five percent expect availability of equity financing availability to get “somewhat better,” and 21 percent expect “somewhat better” availability of debt. Four percent feel there will be “much better” availability of equity, and 3 percent believe the same of debt capital.

But while a year ago only a negligible number of respondents expected debt availability to get “somewhat worse,” this year that figure rose to 19 percent. Another 14 percent believe equity availability will get “somewhat worse.”

The quarterly Sentiment Index research is conducted for The Roundtable by FPL Advisory Group, with survey respondents including real estate company CEOs, presidents and senior executives.